{"id":97,"date":"2015-07-29T20:53:15","date_gmt":"2015-07-29T20:53:15","guid":{"rendered":"https:\/\/courses.candelalearning.com\/intlbusx1xmaster\/?post_type=chapter&#038;p=97"},"modified":"2017-01-09T19:18:33","modified_gmt":"2017-01-09T19:18:33","slug":"global-strategic-choices","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/chapter\/global-strategic-choices\/","title":{"raw":"Reading: Global Strategic Choices","rendered":"Reading: Global Strategic Choices"},"content":{"raw":"<div class=\"im_section\">\r\n<div class=\"bcc-box bcc-highlight\">\r\n<h3 class=\"im_title\">Learning Objectives<\/h3>\r\n<ol id=\"fwk-168388-ch10_s01_l01\" class=\"im_orderedlist\">\r\n\t<li>Learn about the <em class=\"im_emphasis\">rationale and motivations for<\/em> international expansion.<\/li>\r\n\t<li>Understand the importance of international due diligence.<\/li>\r\n\t<li>Recognize the role of regional differences, consumer preferences, and industry dynamics.<\/li>\r\n<\/ol>\r\n<\/div>\r\n<div id=\"fwk-168388-ch10_s01_s01\" class=\"im_section\">\r\n<h2 class=\"im_title im_editable im_block\">The <em class=\"im_emphasis\">Why<\/em>, <em class=\"im_emphasis\">Where<\/em>, and <em class=\"im_emphasis\">How<\/em> of International Expansion<\/h2>\r\nThe allure of global markets can be mesmerizing. Companies that operate in highly competitive or nearly saturated markets at home, for instance, are drawn to look overseas for expansion. But overseas expansion is not a decision to be made lightly, and managers must ask themselves whether the expansion will create real value for shareholders. Companies can easily underestimate the costs of entering new markets if they are not familiar with the new regions and the business practices common within the new regions. For some companies, a misstep in a foreign market can put their entire operations in jeopardy, as happened to French retailer Carrefour after their failed entry into Chile, which you\u2019ll see later in this section. In this section, as summarized in the following figure, you will learn about the rationale for international expansion and then how to analyze and evaluate markets for international expansion.\r\n<div id=\"fwk-168388-ch10_s01_s01_f01\" class=\"im_informalfigure im_large im_large-height im_block\"><a href=\"https:\/\/textimgs.s3.amazonaws.com\/intlbus\/section_12\/65f2a09d53b90696f6264a0d3419d8ce.jpg\" target=\"_blank\"><img class=\"aligncenter\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/789\/2015\/07\/23113745\/sm_65f2a09d53b90696f6264a0d3419d8ce.jpg\" alt=\"chart\" width=\"500\" height=\"650\" \/><\/a><\/div>\r\n<div id=\"fwk-168388-ch10_s01_s01_s01\" class=\"im_section\">\r\n<h3 class=\"im_title im_editable im_block\">Rationale for International Expansion<\/h3>\r\nCompanies embark on an expansion strategy for one or more of the following reasons:\r\n<ul id=\"fwk-168388-ch10_s01_s01_s01_l01\" class=\"im_itemizedlist im_editable im_block\">\r\n\t<li>To improve the cost-effectiveness of their operations<\/li>\r\n\t<li>To expand into new markets for new customers<\/li>\r\n\t<li>To follow global customers<\/li>\r\n<\/ul>\r\nFor example, US chemical firm DuPont, Brazilian aerospace conglomerate Embraer, and Finnish mobile-phone maker Nokia are all investing in China to gain new customers. Schneider Logistics, in contrast, initially entered a new market, Germany, not to get new customers but to retain existing customers who needed a third-party logistics firm in Germany. Thus, Schneider followed its customers to Germany. Other companies, like microprocessor maker Intel, are building manufacturing facilities in China to take advantage of the less costly and increasingly sophisticated production capabilities. For example, Intel built a semiconductor manufacturing plant in Dalian, China, for $2.5 billion, whereas a similar state-of-the-art microprocessor plant in the United States can cost $5 billion.<span id=\"fwk-carpibus-fn10_006\" class=\"im_footnote\">[footnote]\u201c2011 Global R&amp;D Funding Forecast,\u201d <em class=\"im_emphasis\">R&amp;D Magazine<\/em>, December 2010, accessed January 2, 2011, <a class=\"im_link\" href=\"http:\/\/www.rdmag.com\/tags\/publications\/global-r-and-d-funding-forecast\" target=\"_blank\">http:\/\/www.rdmag.com\/tags\/publications\/global-r-and-d-funding-forecast<\/a>.[\/footnote]<\/span> Intel has also built plants in Chengdu and Shanghai, China, and in other Asian countries (Vietnam and Malaysia) to take advantage of lower costs.\r\n\r\n<\/div>\r\n<div id=\"fwk-168388-ch10_s01_s01_s02\" class=\"im_section\">\r\n<h3 class=\"im_title im_editable im_block\">Planning for International Expansion<\/h3>\r\nAs companies look for growth in new areas of the world, they typically prioritize which countries to enter. Because many markets look appealing due to their market size or low-cost production, it is important for firms to prioritize which countries to enter first and to evaluate each country\u2019s relative merits. For example, some markets may be smaller in size, but their strategic complexity is lower, which may make them easier to enter and easier from an operations point of view. Sometimes there are even substantial regional differences within a given country, so careful investigation, research, and planning are important to do before entry.\r\n\r\n<\/div>\r\n<div id=\"fwk-168388-ch10_s01_s01_s03\" class=\"im_section\">\r\n<h3 class=\"im_title im_editable im_block\">International Market Due Diligence<\/h3>\r\n<span class=\"im_margin_term\"><span class=\"im_glossterm\">International market due diligence<\/span><\/span> involves analyzing foreign markets for their potential size, accessibility, cost of operations, and buyer needs and practices to aid the company in deciding whether to invest in entering that market. Market due diligence relies on using not just published research on the markets but also interviews with potential customers and industry experts. A systematic analysis needs to be done, using tools like PESTEL and CAGE, which will be described in Section 8.2 \"PESTEL, Globalization, and Importing\" and Section 8.4 \"CAGE Analysis,\" respectively. In this section, we begin with an overview.\r\n\r\nEvaluating whether to enter a new market is like peeling an onion\u2014there are many layers. For example, when evaluating whether to enter China, the advantage most people see immediately is its large market size. Further analysis shows that the majority of people in that market can\u2019t afford US products, however. But even deeper analysis shows that while many Chinese are poor, the number of people who can afford consumer products is increasing.<span id=\"fwk-carpibus-fn10_007\" class=\"im_footnote\">[footnote]Art Kleiner, \u201cGetting China Right,\u201d <em class=\"im_emphasis\">Strategy and Business<\/em>, March 22, 2010, accessed January 23, 2011, <a class=\"im_link\" href=\"http:\/\/www.strategy-business.com\/article\/00026?pg=al\" target=\"_blank\">http:\/\/www.strategy-business.com\/article\/00026?pg=al<\/a>.[\/footnote]<\/span>\r\n<div id=\"fwk-168388-ch10_s01_s01_s03_s01\" class=\"im_section\">\r\n<h3 class=\"im_title im_editable im_block\">Regional Differences<\/h3>\r\nThe next part of due diligence is to understand the regional differences within the country and to not view the country as a monolith. For example, although companies are dazzled by China\u2019s large market size, deeper analysis shows that 70 percent of the population lives in rural areas. This presents distribution challenges given China\u2019s vast distances. In addition, consumers in different regions speak different dialects and have different tastes in food. Finally, the purchasing power of consumers varies in the different cities. City dwellers in Shanghai and Tianjin can afford higher prices than villagers in a western province.\r\n\r\nLet\u2019s look at a specific example. To achieve the dual goals of reducing operations costs and being closer to a new market of customers, for instance, numerous high-tech companies identify Malaysia as an attractive country to enter. Malaysia is a relatively inexpensive country and the population\u2019s English skills are good, which makes it attractive both for finding local labor and for selling products. But even in a small country like Malaysia, there are regional differences. Companies may be tempted to set up operations in the capital city, Kuala Lumpur, but doing a thorough due diligence reveals that the costs in Kuala Lumpur are rising rapidly. If current trends continue, Kuala Lumpur will be as expensive as London in five years. Therefore, firms seeking primarily a lower-cost advantage would do better to locate to another city in Malaysia, such as Penang, which has many of the same advantages as Kuala Lumpur but does not have its rising costs.<span id=\"fwk-carpibus-fn10_008\" class=\"im_footnote\">[footnote]Ajay Chamania, Heral Mehta, and Vikas Sehgal, \u201cFive Factors for Finding the Right Site,\u201d <em class=\"im_emphasis\">Strategy and Business<\/em>, November 23, 2010, accessed May 17, 2011, <a class=\"im_link\" href=\"http:\/\/www.strategy-business.com\/article\/10403?gko=e029a\" target=\"_blank\">http:\/\/www.strategy-business.com\/article\/10403?gko=e029a<\/a>.[\/footnote]<\/span>\r\n\r\n<\/div>\r\n<div id=\"fwk-168388-ch10_s01_s01_s03_s02\" class=\"im_section\">\r\n<h3 class=\"im_title im_editable im_block\">Understanding Local Consumers<\/h3>\r\nEntering a market means understanding the local consumers and what they look for when making a purchase decision. In some markets, price is an important issue. In other markets, such as Japan, consumers pay more attention to details\u2014such as the quality of products and the design and presentation of the product or retail surroundings\u2014than they do to price. The Japanese demand for perfect products means that firms entering Japan might have to spend a lot on quality management. Moreover, real-estate costs are high in Japan, as are freight costs such as fuel and highway charges. In addition, space is limited at retail stores and stockyards, which means that stores can\u2019t hold much inventory, making replenishment of products a challenge. Therefore, when entering a new market, it\u2019s vital for firms to perform full, detailed market research in order to understand the market conditions and take measures to account for them.\r\n\r\n<\/div>\r\n<div id=\"fwk-168388-ch10_s01_s01_s03_s03\" class=\"im_section\">\r\n<h3 class=\"im_title im_editable im_block\">How to Learn the Needs of a New Foreign Market<\/h3>\r\nThe best way for a company to learn the needs of a new foreign market is to deploy people to immerse themselves in that market. Larger companies, like Intel, employ ethnographers and sociologists to spend months in emerging markets, living in local communities and seeking to understand the latent, unarticulated needs of local consumers. For example, Dr. Genevieve Bell, one of Intel\u2019s anthropologists, traveled extensively across China, observing people in their homes to find out how they use technology and what they want from it. Intel then used her insights to shape its pricing strategies and its partnership plans for the Chinese consumer market.<span id=\"fwk-carpibus-fn10_009\" class=\"im_footnote\">[footnote]Navi Radjou, \u201cR&amp;D 2.0: Fewer Engineers, More Anthropologists,\u201d <em class=\"im_emphasis\">Harvard Business Review<\/em> (blog), June 10, 2009, accessed January 2, 2011, <a class=\"im_link\" href=\"http:\/\/blogs.hbr.org\/radjou\/2009\/06\/rd-20-fewer-engineers-more-ant.html\" target=\"_blank\">http:\/\/blogs.hbr.org\/radjou\/2009\/06\/rd-20-fewer-engineers-more-ant.html<\/a>.[\/footnote]<\/span>\r\n\r\n<\/div>\r\n<div id=\"fwk-168388-ch10_s01_s01_s03_s04\" class=\"im_section\">\r\n<h3 class=\"im_title im_editable im_block\">Differentiation and Capability<\/h3>\r\nWhen entering a new market, companies also need to think critically about how their products and services will be different from what competitors are already offering in the market so that the new offering provides customers value. Companies trying to penetrate a new market must be sure to have some proof that they can deliver to the new market; this proof could be evidence that they have spoken with potential customers and are connected to the market.<span id=\"fwk-carpibus-fn10_010\" class=\"im_footnote\">[footnote]\u201cHow We Do It: Strategic Tests from Four Senior Executives,\u201d <em class=\"im_emphasis\">McKinsey Quarterly<\/em>, January 2011, accessed January 22, 2011, <a class=\"im_link\" href=\"https:\/\/www.mckinseyquarterly.com\/PDFDownload.aspx?ar=2712&amp;srid=27\" target=\"_blank\">https:\/\/www.mckinseyquarterly.com\/PDFDownload.aspx?ar=2712&amp;srid=27<\/a>.[\/footnote]<\/span> Related to firm capability, another factor for firms to consider when evaluating which country to enter is that of \u201ccorporate fit.\u201d <span class=\"im_margin_term\"><span class=\"im_glossterm\">Corporate fit<\/span><\/span> is the degree to which the company\u2019s existing practices, resources and capabilities fit the new market. For example, a company accustomed to operating within a detailed, unbiased legal environment would not find a good corporate fit in China because of the current vagaries of Chinese contract law.<span id=\"fwk-carpibus-fn10_011\" class=\"im_footnote\">[footnote]Carol Wingard, \u201cEnsuring Value Creation through International Expansion,\u201d <em class=\"im_emphasis\">L.E.K. Consulting Executive Insights<\/em> 5, no. 3, accessed January 15, 2011, <a class=\"im_link\" href=\"http:\/\/www.lek.com\/sites\/default\/files\/Volume_V_Issue_3.pdf\" target=\"_blank\">http:\/\/www.lek.com\/sites\/default\/files\/Volume_V_Issue_3.pdf<\/a>.[\/footnote]<\/span> Whereas a low corporate fit doesn\u2019t preclude expanding into that country, it does signal that additional resources or caution may be necessary. Two typical dimensions of corporate fit are human resources practices and the firm\u2019s risk tolerance.\r\n<div id=\"fwk-168388-ch10_s01_s01_s03_s04_n01\" class=\"im_callout im_editable im_block\">\r\n<h3 class=\"im_title\">Did You Know?<\/h3>\r\nOver the years 2005\u201309, the number of Global 500 companies headquartered in BRIC countries (Brazil, Russia, India, and China) increased significantly. China grew from 8 headquarters to 43, India doubled from 5 to 10, Brazil rose from 5 to 9, and Russia went from 4 to 6. The United States still leads with 181 company headquarters, but it\u2019s down from 219 in 2005.<span id=\"fwk-carpibus-fn10_012\" class=\"im_footnote\">[footnote]Jeanne Meister and Karie Willyerd, <em class=\"im_emphasis\">The 2020 Workplace<\/em> (New York: HarperBusiness, 2010), 22, citing \u201cFT500 2009,\u201d <em class=\"im_emphasis\">Financial Times<\/em>, accessed November 27, 2009, <a class=\"im_link\" href=\"http:\/\/www.ft.com\/reports\/ft500-2009\" target=\"_blank\">http:\/\/www.ft.com\/reports\/ft500-2009<\/a>.[\/footnote]<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n<div id=\"fwk-168388-ch10_s01_s01_s03_s05\" class=\"im_section\">\r\n<h3 class=\"im_title im_editable im_block\">Industry Dynamics<\/h3>\r\nIn some cases, the decision to enter a new market will depend on the specific circumstances of the industry in which the company operates. For example, companies that help build infrastructure need to enter countries where the government or large companies have a lot of capital, because infrastructure projects are so expensive. The president of Spanish infrastructure company Fomento de Construcciones y Contratas said, \u201cWe focus on those countries where there is more money and there is a gap in the infrastructure,\u201d such as China, Singapore, the United States, and Algeria.<span id=\"fwk-carpibus-fn10_013\" class=\"im_footnote\">[footnote]\u201cPractical Advice for Companies Betting on a Strategy of Globalization,\u201d <em class=\"im_emphasis\">Knowledge@Wharton<\/em>, January 12, 2011, accessed February 5, 2011, <a class=\"im_link\" href=\"http:\/\/knowledge.wharton.upenn.edu\/article.cfm?articleid=2541\" target=\"_blank\">http:\/\/knowledge.wharton.upenn.edu\/article.cfm?articleid=2541<\/a>.[\/footnote]<\/span>\r\n\r\nPolitical stability, legal security, and the \u201crule of law\u201d\u2014the presence of and adherence to laws related to business contracts, for example\u2014are important considerations prior to market entry regardless of which industry a company is in. Fomento de Construcciones y Contratas learned this the hard way and ended up leaving some countries it had entered. The company\u2019s president, Baldomero Falcones, explained, \u201cWhen you decide whether or not to invest, one factor to take into account is the rule of law. Our ethical code was considered hard to understand in some countries, so we decided to leave during the early stages of the investment.\u201d<span id=\"fwk-carpibus-fn10_014\" class=\"im_footnote\">[footnote]\u201cPractical Advice for Companies Betting on a Strategy of Globalization,\u201d <em class=\"im_emphasis\">Knowledge@Wharton<\/em>, January 12, 2011, accessed February 5, 2011, <a class=\"im_link\" href=\"http:\/\/knowledge.wharton.upenn.edu\/article.cfm?articleid=2541\" target=\"_blank\">http:\/\/knowledge.wharton.upenn.edu\/article.cfm?articleid=2541<\/a>.[\/footnote]<\/span>\r\n<div id=\"fwk-168388-ch10_s01_s01_s03_s05_n01\" class=\"im_callout im_editable im_block\">\r\n<h3 class=\"im_title\">Ethics in Action<\/h3>\r\nCompanies based in China are entering Australia and Africa, primarily to gain access to raw materials. Trade between China and Africa grew an average of 30 percent in the decade up to 2010, reaching $115 billion that year.<span id=\"fwk-carpibus-fn10_015\" class=\"im_footnote\">[footnote]Paul Redfern, \u201cAfrica: Trade between China and Continent at U.S.$115 Billion a Year,\u201d <em class=\"im_emphasis\">Daily Nation<\/em>, February 11, 2011, accessed February 14, 2011, <a class=\"im_link\" href=\"http:\/\/allafrica.com\/stories\/201102140779.html\" target=\"_blank\">http:\/\/allafrica.com\/stories\/201102140779.html<\/a>.[\/footnote]<\/span> Chinese companies operate in Zambia (mining coal), the Democratic Republic of the Congo (mining cobalt), and Angola (drilling for oil). To get countries to agree to the deals, China had to agree to build new infrastructure, such as roads, railways, hospitals, and schools. Some economists, such as Dambisa Moyo, who wrote <em class=\"im_emphasis\">Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa<\/em>, believe that the way to help developing countries like those in Africa is not through aid but through trade. Moyo argues that long-term charity is degrading. She advocates business investments and setting up enterprises that employ local workers. Ecobank CEO Arnold Ekpe (whose bank employs 11,000 people in twenty-six African states) says the Chinese look at Africa differently than the West does: \u201c[The Chinese] are not setting out to do good,\u201d he says. \u201cThey are setting out to do business. It\u2019s actually much less demeaning.\u201d<span id=\"fwk-carpibus-fn10_016\" class=\"im_footnote\">[footnote]Alex Perry, \u201cAfrica, Business Destination,\u201d <em class=\"im_emphasis\">Time<\/em>, March 12, 2009, accessed February 14, 2011, <a class=\"im_link\" href=\"http:\/\/www.time.com\/time\/specials\/packages\/article\/0,28804,1884779_1884782_1884769,00.html#ixzz1DwbdOXvs\" target=\"_blank\">http:\/\/www.time.com\/time\/specials\/packages\/article\/0,28804,1884779_1884782_1884769,00.html#ixzz1DwbdOXvs<\/a>.[\/footnote]<\/span> Deborah Brautigam, associate professor at the American University\u2019s International Development Program, agrees. In her book, <em class=\"im_emphasis\">The Dragon\u2019s Gift: The Real Story of China in Africa<\/em>, she says, \u201cThe Chinese understand something very fundamental about state building: new states need to build buildings and dignity, not simply strive to end poverty.\u201d<span id=\"fwk-carpibus-fn10_017\" class=\"im_footnote\">[footnote]Steve Bloomfield, \u201cChina in Africa: Give and Take,\u201d <em class=\"im_emphasis\">Emerging Markets<\/em>, May 27, 2010, accessed February 14, 2011, <a class=\"im_link\" href=\"http:\/\/www.emergingmarkets.org\/Article\/2580082\/CHINA-IN-AFRICA-Give-and-take.html\" target=\"_blank\">http:\/\/www.emergingmarkets.org\/Article\/2580082\/CHINA-IN-AFRICA-Give-and-take.html<\/a>.[\/footnote]<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n<div id=\"fwk-168388-ch10_s01_s01_s03_s06\" class=\"im_section\">\r\n<h3 class=\"im_title im_editable im_block\">Steps and Missteps in International Expansion<\/h3>\r\nLet\u2019s look at an example of the steps\u2014as well as the missteps\u2014in international expansion. American retailers entered the Chilean market in the mid- to late 1990s. They chose Chile as the market to enter because of the country\u2019s strong economy, the advanced level of the Chilean retail sector, and the free trade agreements signed by Chile. From that standpoint, their due diligence was accurate, but it didn\u2019t go far enough, as we\u2019ll see.\r\n\r\nRetailer JCPenney entered Chile in 1995, opening two stores. French retailer Carrefour also entered Chile, in 1998. Neither company entered through an alliance with a local retailer. Both companies were forced to close their Chilean operations due to the losses they were incurring. Analysis by the Aldolfo Ib\u00e1\u00f1ez University in Chile explained the reasons behind the failures: the managers of these companies were not able to connect with the local market, nor did they understand the variables that affected their businesses in Chile.<span id=\"fwk-carpibus-fn10_018\" class=\"im_footnote\">[footnote]\u201cThe Globalization of Chilean Retailing,\u201d <em class=\"im_emphasis\">Knowledge@Wharton<\/em>, December 12, 2007, accessed January 5, 2011, <a class=\"im_link\" href=\"http:\/\/www.wharton.universia.net\/index.cfm?fa=viewfeature&amp;id=1450&amp;language=english\" target=\"_blank\">http:\/\/www.wharton.universia.net\/index.cfm?fa=viewfeature&amp;id=1450&amp;language=english<\/a>.[\/footnote]<\/span> Specifically, the Chilean retailing market was advanced, but it was also very competitive. The new entrants (JCPenney and Carrefour) didn\u2019t realize that the existing major local retailers had their own banks and offered banking services at their retail stores, which was a major reason for their profitability. The outsiders assumed that profitability in this sector was based solely on retail sales. They missed the importance of the bank ties. Another typical mistake that companies make is to assume that a new market has no competition just because the company\u2019s traditional competitors aren\u2019t in that market.\r\n\r\nNow let\u2019s continue with the example and watch native Chilean retailers enter a market new to them: Peru.\r\n\r\nThe Chilean retailers were successful in their own markets but wanted to expand beyond their borders in order to get new customers in new markets. The Chilean retailers chose to enter Peru, which had the same language.\r\n\r\nThe Peruvian retailing market was not advanced, and it did not offer credit to customers. The Chileans entered the market through partnership with local Peruvian firms, and they introduced the concept of credit cards, which was an innovation in the poorly developed Peruvian market. Entering through a domestic partner helped the Chileans because it eliminated hostility and made the investment process easier. Offering the innovation of credit cards made the Chilean retailers distinctive and offered an advantage over the local offerings.<span id=\"fwk-carpibus-fn10_019\" class=\"im_footnote\">[footnote]\u201cThe Globalization of Chilean Retailing,\u201d <em class=\"im_emphasis\">Knowledge@Wharton<\/em>, December 12, 2007, accessed January 5, 2011, <a class=\"im_link\" href=\"http:\/\/www.wharton.universia.net\/index.cfm?fa=viewfeature&amp;id=1450&amp;language=english\" target=\"_blank\">http:\/\/www.wharton.universia.net\/index.cfm?fa=viewfeature&amp;id=1450&amp;language=english<\/a>.[\/footnote]<\/span>\r\n<div id=\"fwk-168388-ch10_s01_s01_s03_s06_n01\" class=\"im_key_takeaways im_editable im_block\">\r\n<h3 class=\"im_title\">Key Takeaways<\/h3>\r\n<ul id=\"fwk-168388-ch10_s01_s01_s03_s06_l01\" class=\"im_itemizedlist\">\r\n\t<li>Companies embark on an expansion strategy for one or more of the following reasons: (1) to improve the cost-effectiveness of their operations, (2) to expand into new markets for new customers, and (3) to follow global customers.<\/li>\r\n\t<li>Planning for international expansion involves doing a thorough due diligence on the potential markets into which the country is considering expanding. This includes understanding the regional differences within markets, the needs of local customers, and the firm\u2019s own capabilities in relation to the dynamics of the industry.<\/li>\r\n\t<li>Common mistakes that firms make when entering a new market include not doing thorough research prior to entry, not understanding the competition, and not offering a truly targeted value proposition for buyers in the new market.<\/li>\r\n<\/ul>\r\n<\/div>\r\n<div class=\"bcc-box bcc-info\">\r\n<h3 class=\"im_title\">Exercises[footnote](AACSB: Reflective Thinking, Analytical Skills)[\/footnote]<\/h3>\r\n<ol id=\"fwk-168388-ch10_s01_s01_s03_s06_l02\" class=\"im_orderedlist\">\r\n\t<li>What are some of the common motivators for companies embarking on international expansion?<\/li>\r\n\t<li>Why is international market due diligence important?<\/li>\r\n\t<li>What are some ways in which a company can learn about the needs of local buyers in a new international market?<\/li>\r\n\t<li>Discuss the meaning of \u201ccorporate fit\u201d in relation to international market expansion.<\/li>\r\n\t<li>Name two common mistakes firms make when expanding internationally<\/li>\r\n<\/ol>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>","rendered":"<div class=\"im_section\">\n<div class=\"bcc-box bcc-highlight\">\n<h3 class=\"im_title\">Learning Objectives<\/h3>\n<ol id=\"fwk-168388-ch10_s01_l01\" class=\"im_orderedlist\">\n<li>Learn about the <em class=\"im_emphasis\">rationale and motivations for<\/em> international expansion.<\/li>\n<li>Understand the importance of international due diligence.<\/li>\n<li>Recognize the role of regional differences, consumer preferences, and industry dynamics.<\/li>\n<\/ol>\n<\/div>\n<div id=\"fwk-168388-ch10_s01_s01\" class=\"im_section\">\n<h2 class=\"im_title im_editable im_block\">The <em class=\"im_emphasis\">Why<\/em>, <em class=\"im_emphasis\">Where<\/em>, and <em class=\"im_emphasis\">How<\/em> of International Expansion<\/h2>\n<p>The allure of global markets can be mesmerizing. Companies that operate in highly competitive or nearly saturated markets at home, for instance, are drawn to look overseas for expansion. But overseas expansion is not a decision to be made lightly, and managers must ask themselves whether the expansion will create real value for shareholders. Companies can easily underestimate the costs of entering new markets if they are not familiar with the new regions and the business practices common within the new regions. For some companies, a misstep in a foreign market can put their entire operations in jeopardy, as happened to French retailer Carrefour after their failed entry into Chile, which you\u2019ll see later in this section. In this section, as summarized in the following figure, you will learn about the rationale for international expansion and then how to analyze and evaluate markets for international expansion.<\/p>\n<div id=\"fwk-168388-ch10_s01_s01_f01\" class=\"im_informalfigure im_large im_large-height im_block\"><a href=\"https:\/\/textimgs.s3.amazonaws.com\/intlbus\/section_12\/65f2a09d53b90696f6264a0d3419d8ce.jpg\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/789\/2015\/07\/23113745\/sm_65f2a09d53b90696f6264a0d3419d8ce.jpg\" alt=\"chart\" width=\"500\" height=\"650\" \/><\/a><\/div>\n<div id=\"fwk-168388-ch10_s01_s01_s01\" class=\"im_section\">\n<h3 class=\"im_title im_editable im_block\">Rationale for International Expansion<\/h3>\n<p>Companies embark on an expansion strategy for one or more of the following reasons:<\/p>\n<ul id=\"fwk-168388-ch10_s01_s01_s01_l01\" class=\"im_itemizedlist im_editable im_block\">\n<li>To improve the cost-effectiveness of their operations<\/li>\n<li>To expand into new markets for new customers<\/li>\n<li>To follow global customers<\/li>\n<\/ul>\n<p>For example, US chemical firm DuPont, Brazilian aerospace conglomerate Embraer, and Finnish mobile-phone maker Nokia are all investing in China to gain new customers. Schneider Logistics, in contrast, initially entered a new market, Germany, not to get new customers but to retain existing customers who needed a third-party logistics firm in Germany. Thus, Schneider followed its customers to Germany. Other companies, like microprocessor maker Intel, are building manufacturing facilities in China to take advantage of the less costly and increasingly sophisticated production capabilities. For example, Intel built a semiconductor manufacturing plant in Dalian, China, for $2.5 billion, whereas a similar state-of-the-art microprocessor plant in the United States can cost $5 billion.<span id=\"fwk-carpibus-fn10_006\" class=\"im_footnote\"><a class=\"footnote\" title=\"\u201c2011 Global R&amp;D Funding Forecast,\u201d R&amp;D Magazine, December 2010, accessed January 2, 2011, http:\/\/www.rdmag.com\/tags\/publications\/global-r-and-d-funding-forecast.\" id=\"return-footnote-97-1\" href=\"#footnote-97-1\" aria-label=\"Footnote 1\"><sup class=\"footnote\">[1]<\/sup><\/a><\/span> Intel has also built plants in Chengdu and Shanghai, China, and in other Asian countries (Vietnam and Malaysia) to take advantage of lower costs.<\/p>\n<\/div>\n<div id=\"fwk-168388-ch10_s01_s01_s02\" class=\"im_section\">\n<h3 class=\"im_title im_editable im_block\">Planning for International Expansion<\/h3>\n<p>As companies look for growth in new areas of the world, they typically prioritize which countries to enter. Because many markets look appealing due to their market size or low-cost production, it is important for firms to prioritize which countries to enter first and to evaluate each country\u2019s relative merits. For example, some markets may be smaller in size, but their strategic complexity is lower, which may make them easier to enter and easier from an operations point of view. Sometimes there are even substantial regional differences within a given country, so careful investigation, research, and planning are important to do before entry.<\/p>\n<\/div>\n<div id=\"fwk-168388-ch10_s01_s01_s03\" class=\"im_section\">\n<h3 class=\"im_title im_editable im_block\">International Market Due Diligence<\/h3>\n<p><span class=\"im_margin_term\"><span class=\"im_glossterm\">International market due diligence<\/span><\/span> involves analyzing foreign markets for their potential size, accessibility, cost of operations, and buyer needs and practices to aid the company in deciding whether to invest in entering that market. Market due diligence relies on using not just published research on the markets but also interviews with potential customers and industry experts. A systematic analysis needs to be done, using tools like PESTEL and CAGE, which will be described in Section 8.2 &#8220;PESTEL, Globalization, and Importing&#8221; and Section 8.4 &#8220;CAGE Analysis,&#8221; respectively. In this section, we begin with an overview.<\/p>\n<p>Evaluating whether to enter a new market is like peeling an onion\u2014there are many layers. For example, when evaluating whether to enter China, the advantage most people see immediately is its large market size. Further analysis shows that the majority of people in that market can\u2019t afford US products, however. But even deeper analysis shows that while many Chinese are poor, the number of people who can afford consumer products is increasing.<span id=\"fwk-carpibus-fn10_007\" class=\"im_footnote\"><a class=\"footnote\" title=\"Art Kleiner, \u201cGetting China Right,\u201d Strategy and Business, March 22, 2010, accessed January 23, 2011, http:\/\/www.strategy-business.com\/article\/00026?pg=al.\" id=\"return-footnote-97-2\" href=\"#footnote-97-2\" aria-label=\"Footnote 2\"><sup class=\"footnote\">[2]<\/sup><\/a><\/span><\/p>\n<div id=\"fwk-168388-ch10_s01_s01_s03_s01\" class=\"im_section\">\n<h3 class=\"im_title im_editable im_block\">Regional Differences<\/h3>\n<p>The next part of due diligence is to understand the regional differences within the country and to not view the country as a monolith. For example, although companies are dazzled by China\u2019s large market size, deeper analysis shows that 70 percent of the population lives in rural areas. This presents distribution challenges given China\u2019s vast distances. In addition, consumers in different regions speak different dialects and have different tastes in food. Finally, the purchasing power of consumers varies in the different cities. City dwellers in Shanghai and Tianjin can afford higher prices than villagers in a western province.<\/p>\n<p>Let\u2019s look at a specific example. To achieve the dual goals of reducing operations costs and being closer to a new market of customers, for instance, numerous high-tech companies identify Malaysia as an attractive country to enter. Malaysia is a relatively inexpensive country and the population\u2019s English skills are good, which makes it attractive both for finding local labor and for selling products. But even in a small country like Malaysia, there are regional differences. Companies may be tempted to set up operations in the capital city, Kuala Lumpur, but doing a thorough due diligence reveals that the costs in Kuala Lumpur are rising rapidly. If current trends continue, Kuala Lumpur will be as expensive as London in five years. Therefore, firms seeking primarily a lower-cost advantage would do better to locate to another city in Malaysia, such as Penang, which has many of the same advantages as Kuala Lumpur but does not have its rising costs.<span id=\"fwk-carpibus-fn10_008\" class=\"im_footnote\"><a class=\"footnote\" title=\"Ajay Chamania, Heral Mehta, and Vikas Sehgal, \u201cFive Factors for Finding the Right Site,\u201d Strategy and Business, November 23, 2010, accessed May 17, 2011, http:\/\/www.strategy-business.com\/article\/10403?gko=e029a.\" id=\"return-footnote-97-3\" href=\"#footnote-97-3\" aria-label=\"Footnote 3\"><sup class=\"footnote\">[3]<\/sup><\/a><\/span><\/p>\n<\/div>\n<div id=\"fwk-168388-ch10_s01_s01_s03_s02\" class=\"im_section\">\n<h3 class=\"im_title im_editable im_block\">Understanding Local Consumers<\/h3>\n<p>Entering a market means understanding the local consumers and what they look for when making a purchase decision. In some markets, price is an important issue. In other markets, such as Japan, consumers pay more attention to details\u2014such as the quality of products and the design and presentation of the product or retail surroundings\u2014than they do to price. The Japanese demand for perfect products means that firms entering Japan might have to spend a lot on quality management. Moreover, real-estate costs are high in Japan, as are freight costs such as fuel and highway charges. In addition, space is limited at retail stores and stockyards, which means that stores can\u2019t hold much inventory, making replenishment of products a challenge. Therefore, when entering a new market, it\u2019s vital for firms to perform full, detailed market research in order to understand the market conditions and take measures to account for them.<\/p>\n<\/div>\n<div id=\"fwk-168388-ch10_s01_s01_s03_s03\" class=\"im_section\">\n<h3 class=\"im_title im_editable im_block\">How to Learn the Needs of a New Foreign Market<\/h3>\n<p>The best way for a company to learn the needs of a new foreign market is to deploy people to immerse themselves in that market. Larger companies, like Intel, employ ethnographers and sociologists to spend months in emerging markets, living in local communities and seeking to understand the latent, unarticulated needs of local consumers. For example, Dr. Genevieve Bell, one of Intel\u2019s anthropologists, traveled extensively across China, observing people in their homes to find out how they use technology and what they want from it. Intel then used her insights to shape its pricing strategies and its partnership plans for the Chinese consumer market.<span id=\"fwk-carpibus-fn10_009\" class=\"im_footnote\"><a class=\"footnote\" title=\"Navi Radjou, \u201cR&amp;D 2.0: Fewer Engineers, More Anthropologists,\u201d Harvard Business Review (blog), June 10, 2009, accessed January 2, 2011, http:\/\/blogs.hbr.org\/radjou\/2009\/06\/rd-20-fewer-engineers-more-ant.html.\" id=\"return-footnote-97-4\" href=\"#footnote-97-4\" aria-label=\"Footnote 4\"><sup class=\"footnote\">[4]<\/sup><\/a><\/span><\/p>\n<\/div>\n<div id=\"fwk-168388-ch10_s01_s01_s03_s04\" class=\"im_section\">\n<h3 class=\"im_title im_editable im_block\">Differentiation and Capability<\/h3>\n<p>When entering a new market, companies also need to think critically about how their products and services will be different from what competitors are already offering in the market so that the new offering provides customers value. Companies trying to penetrate a new market must be sure to have some proof that they can deliver to the new market; this proof could be evidence that they have spoken with potential customers and are connected to the market.<span id=\"fwk-carpibus-fn10_010\" class=\"im_footnote\"><a class=\"footnote\" title=\"\u201cHow We Do It: Strategic Tests from Four Senior Executives,\u201d McKinsey Quarterly, January 2011, accessed January 22, 2011, https:\/\/www.mckinseyquarterly.com\/PDFDownload.aspx?ar=2712&amp;srid=27.\" id=\"return-footnote-97-5\" href=\"#footnote-97-5\" aria-label=\"Footnote 5\"><sup class=\"footnote\">[5]<\/sup><\/a><\/span> Related to firm capability, another factor for firms to consider when evaluating which country to enter is that of \u201ccorporate fit.\u201d <span class=\"im_margin_term\"><span class=\"im_glossterm\">Corporate fit<\/span><\/span> is the degree to which the company\u2019s existing practices, resources and capabilities fit the new market. For example, a company accustomed to operating within a detailed, unbiased legal environment would not find a good corporate fit in China because of the current vagaries of Chinese contract law.<span id=\"fwk-carpibus-fn10_011\" class=\"im_footnote\"><a class=\"footnote\" title=\"Carol Wingard, \u201cEnsuring Value Creation through International Expansion,\u201d L.E.K. Consulting Executive Insights 5, no. 3, accessed January 15, 2011, http:\/\/www.lek.com\/sites\/default\/files\/Volume_V_Issue_3.pdf.\" id=\"return-footnote-97-6\" href=\"#footnote-97-6\" aria-label=\"Footnote 6\"><sup class=\"footnote\">[6]<\/sup><\/a><\/span> Whereas a low corporate fit doesn\u2019t preclude expanding into that country, it does signal that additional resources or caution may be necessary. Two typical dimensions of corporate fit are human resources practices and the firm\u2019s risk tolerance.<\/p>\n<div id=\"fwk-168388-ch10_s01_s01_s03_s04_n01\" class=\"im_callout im_editable im_block\">\n<h3 class=\"im_title\">Did You Know?<\/h3>\n<p>Over the years 2005\u201309, the number of Global 500 companies headquartered in BRIC countries (Brazil, Russia, India, and China) increased significantly. China grew from 8 headquarters to 43, India doubled from 5 to 10, Brazil rose from 5 to 9, and Russia went from 4 to 6. The United States still leads with 181 company headquarters, but it\u2019s down from 219 in 2005.<span id=\"fwk-carpibus-fn10_012\" class=\"im_footnote\"><a class=\"footnote\" title=\"Jeanne Meister and Karie Willyerd, The 2020 Workplace (New York: HarperBusiness, 2010), 22, citing \u201cFT500 2009,\u201d Financial Times, accessed November 27, 2009, http:\/\/www.ft.com\/reports\/ft500-2009.\" id=\"return-footnote-97-7\" href=\"#footnote-97-7\" aria-label=\"Footnote 7\"><sup class=\"footnote\">[7]<\/sup><\/a><\/span><\/p>\n<\/div>\n<\/div>\n<div id=\"fwk-168388-ch10_s01_s01_s03_s05\" class=\"im_section\">\n<h3 class=\"im_title im_editable im_block\">Industry Dynamics<\/h3>\n<p>In some cases, the decision to enter a new market will depend on the specific circumstances of the industry in which the company operates. For example, companies that help build infrastructure need to enter countries where the government or large companies have a lot of capital, because infrastructure projects are so expensive. The president of Spanish infrastructure company Fomento de Construcciones y Contratas said, \u201cWe focus on those countries where there is more money and there is a gap in the infrastructure,\u201d such as China, Singapore, the United States, and Algeria.<span id=\"fwk-carpibus-fn10_013\" class=\"im_footnote\"><a class=\"footnote\" title=\"\u201cPractical Advice for Companies Betting on a Strategy of Globalization,\u201d Knowledge@Wharton, January 12, 2011, accessed February 5, 2011, http:\/\/knowledge.wharton.upenn.edu\/article.cfm?articleid=2541.\" id=\"return-footnote-97-8\" href=\"#footnote-97-8\" aria-label=\"Footnote 8\"><sup class=\"footnote\">[8]<\/sup><\/a><\/span><\/p>\n<p>Political stability, legal security, and the \u201crule of law\u201d\u2014the presence of and adherence to laws related to business contracts, for example\u2014are important considerations prior to market entry regardless of which industry a company is in. Fomento de Construcciones y Contratas learned this the hard way and ended up leaving some countries it had entered. The company\u2019s president, Baldomero Falcones, explained, \u201cWhen you decide whether or not to invest, one factor to take into account is the rule of law. Our ethical code was considered hard to understand in some countries, so we decided to leave during the early stages of the investment.\u201d<span id=\"fwk-carpibus-fn10_014\" class=\"im_footnote\"><a class=\"footnote\" title=\"\u201cPractical Advice for Companies Betting on a Strategy of Globalization,\u201d Knowledge@Wharton, January 12, 2011, accessed February 5, 2011, http:\/\/knowledge.wharton.upenn.edu\/article.cfm?articleid=2541.\" id=\"return-footnote-97-9\" href=\"#footnote-97-9\" aria-label=\"Footnote 9\"><sup class=\"footnote\">[9]<\/sup><\/a><\/span><\/p>\n<div id=\"fwk-168388-ch10_s01_s01_s03_s05_n01\" class=\"im_callout im_editable im_block\">\n<h3 class=\"im_title\">Ethics in Action<\/h3>\n<p>Companies based in China are entering Australia and Africa, primarily to gain access to raw materials. Trade between China and Africa grew an average of 30 percent in the decade up to 2010, reaching $115 billion that year.<span id=\"fwk-carpibus-fn10_015\" class=\"im_footnote\"><a class=\"footnote\" title=\"Paul Redfern, \u201cAfrica: Trade between China and Continent at U.S.$115 Billion a Year,\u201d Daily Nation, February 11, 2011, accessed February 14, 2011, http:\/\/allafrica.com\/stories\/201102140779.html.\" id=\"return-footnote-97-10\" href=\"#footnote-97-10\" aria-label=\"Footnote 10\"><sup class=\"footnote\">[10]<\/sup><\/a><\/span> Chinese companies operate in Zambia (mining coal), the Democratic Republic of the Congo (mining cobalt), and Angola (drilling for oil). To get countries to agree to the deals, China had to agree to build new infrastructure, such as roads, railways, hospitals, and schools. Some economists, such as Dambisa Moyo, who wrote <em class=\"im_emphasis\">Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa<\/em>, believe that the way to help developing countries like those in Africa is not through aid but through trade. Moyo argues that long-term charity is degrading. She advocates business investments and setting up enterprises that employ local workers. Ecobank CEO Arnold Ekpe (whose bank employs 11,000 people in twenty-six African states) says the Chinese look at Africa differently than the West does: \u201c[The Chinese] are not setting out to do good,\u201d he says. \u201cThey are setting out to do business. It\u2019s actually much less demeaning.\u201d<span id=\"fwk-carpibus-fn10_016\" class=\"im_footnote\"><a class=\"footnote\" title=\"Alex Perry, \u201cAfrica, Business Destination,\u201d Time, March 12, 2009, accessed February 14, 2011, http:\/\/www.time.com\/time\/specials\/packages\/article\/0,28804,1884779_1884782_1884769,00.html#ixzz1DwbdOXvs.\" id=\"return-footnote-97-11\" href=\"#footnote-97-11\" aria-label=\"Footnote 11\"><sup class=\"footnote\">[11]<\/sup><\/a><\/span> Deborah Brautigam, associate professor at the American University\u2019s International Development Program, agrees. In her book, <em class=\"im_emphasis\">The Dragon\u2019s Gift: The Real Story of China in Africa<\/em>, she says, \u201cThe Chinese understand something very fundamental about state building: new states need to build buildings and dignity, not simply strive to end poverty.\u201d<span id=\"fwk-carpibus-fn10_017\" class=\"im_footnote\"><a class=\"footnote\" title=\"Steve Bloomfield, \u201cChina in Africa: Give and Take,\u201d Emerging Markets, May 27, 2010, accessed February 14, 2011, http:\/\/www.emergingmarkets.org\/Article\/2580082\/CHINA-IN-AFRICA-Give-and-take.html.\" id=\"return-footnote-97-12\" href=\"#footnote-97-12\" aria-label=\"Footnote 12\"><sup class=\"footnote\">[12]<\/sup><\/a><\/span><\/p>\n<\/div>\n<\/div>\n<div id=\"fwk-168388-ch10_s01_s01_s03_s06\" class=\"im_section\">\n<h3 class=\"im_title im_editable im_block\">Steps and Missteps in International Expansion<\/h3>\n<p>Let\u2019s look at an example of the steps\u2014as well as the missteps\u2014in international expansion. American retailers entered the Chilean market in the mid- to late 1990s. They chose Chile as the market to enter because of the country\u2019s strong economy, the advanced level of the Chilean retail sector, and the free trade agreements signed by Chile. From that standpoint, their due diligence was accurate, but it didn\u2019t go far enough, as we\u2019ll see.<\/p>\n<p>Retailer JCPenney entered Chile in 1995, opening two stores. French retailer Carrefour also entered Chile, in 1998. Neither company entered through an alliance with a local retailer. Both companies were forced to close their Chilean operations due to the losses they were incurring. Analysis by the Aldolfo Ib\u00e1\u00f1ez University in Chile explained the reasons behind the failures: the managers of these companies were not able to connect with the local market, nor did they understand the variables that affected their businesses in Chile.<span id=\"fwk-carpibus-fn10_018\" class=\"im_footnote\"><a class=\"footnote\" title=\"\u201cThe Globalization of Chilean Retailing,\u201d Knowledge@Wharton, December 12, 2007, accessed January 5, 2011, http:\/\/www.wharton.universia.net\/index.cfm?fa=viewfeature&amp;id=1450&amp;language=english.\" id=\"return-footnote-97-13\" href=\"#footnote-97-13\" aria-label=\"Footnote 13\"><sup class=\"footnote\">[13]<\/sup><\/a><\/span> Specifically, the Chilean retailing market was advanced, but it was also very competitive. The new entrants (JCPenney and Carrefour) didn\u2019t realize that the existing major local retailers had their own banks and offered banking services at their retail stores, which was a major reason for their profitability. The outsiders assumed that profitability in this sector was based solely on retail sales. They missed the importance of the bank ties. Another typical mistake that companies make is to assume that a new market has no competition just because the company\u2019s traditional competitors aren\u2019t in that market.<\/p>\n<p>Now let\u2019s continue with the example and watch native Chilean retailers enter a market new to them: Peru.<\/p>\n<p>The Chilean retailers were successful in their own markets but wanted to expand beyond their borders in order to get new customers in new markets. The Chilean retailers chose to enter Peru, which had the same language.<\/p>\n<p>The Peruvian retailing market was not advanced, and it did not offer credit to customers. The Chileans entered the market through partnership with local Peruvian firms, and they introduced the concept of credit cards, which was an innovation in the poorly developed Peruvian market. Entering through a domestic partner helped the Chileans because it eliminated hostility and made the investment process easier. Offering the innovation of credit cards made the Chilean retailers distinctive and offered an advantage over the local offerings.<span id=\"fwk-carpibus-fn10_019\" class=\"im_footnote\"><a class=\"footnote\" title=\"\u201cThe Globalization of Chilean Retailing,\u201d Knowledge@Wharton, December 12, 2007, accessed January 5, 2011, http:\/\/www.wharton.universia.net\/index.cfm?fa=viewfeature&amp;id=1450&amp;language=english.\" id=\"return-footnote-97-14\" href=\"#footnote-97-14\" aria-label=\"Footnote 14\"><sup class=\"footnote\">[14]<\/sup><\/a><\/span><\/p>\n<div id=\"fwk-168388-ch10_s01_s01_s03_s06_n01\" class=\"im_key_takeaways im_editable im_block\">\n<h3 class=\"im_title\">Key Takeaways<\/h3>\n<ul id=\"fwk-168388-ch10_s01_s01_s03_s06_l01\" class=\"im_itemizedlist\">\n<li>Companies embark on an expansion strategy for one or more of the following reasons: (1) to improve the cost-effectiveness of their operations, (2) to expand into new markets for new customers, and (3) to follow global customers.<\/li>\n<li>Planning for international expansion involves doing a thorough due diligence on the potential markets into which the country is considering expanding. This includes understanding the regional differences within markets, the needs of local customers, and the firm\u2019s own capabilities in relation to the dynamics of the industry.<\/li>\n<li>Common mistakes that firms make when entering a new market include not doing thorough research prior to entry, not understanding the competition, and not offering a truly targeted value proposition for buyers in the new market.<\/li>\n<\/ul>\n<\/div>\n<div class=\"bcc-box bcc-info\">\n<h3 class=\"im_title\">Exercises<a class=\"footnote\" title=\"(AACSB: Reflective Thinking, Analytical Skills)\" id=\"return-footnote-97-15\" href=\"#footnote-97-15\" aria-label=\"Footnote 15\"><sup class=\"footnote\">[15]<\/sup><\/a><\/h3>\n<ol id=\"fwk-168388-ch10_s01_s01_s03_s06_l02\" class=\"im_orderedlist\">\n<li>What are some of the common motivators for companies embarking on international expansion?<\/li>\n<li>Why is international market due diligence important?<\/li>\n<li>What are some ways in which a company can learn about the needs of local buyers in a new international market?<\/li>\n<li>Discuss the meaning of \u201ccorporate fit\u201d in relation to international market expansion.<\/li>\n<li>Name two common mistakes firms make when expanding internationally<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<hr class=\"before-footnotes clear\" \/><div class=\"footnotes\"><ol><li id=\"footnote-97-1\">\u201c2011 Global R&amp;D Funding Forecast,\u201d <em class=\"im_emphasis\">R&amp;D Magazine<\/em>, December 2010, accessed January 2, 2011, <a class=\"im_link\" href=\"http:\/\/www.rdmag.com\/tags\/publications\/global-r-and-d-funding-forecast\" target=\"_blank\">http:\/\/www.rdmag.com\/tags\/publications\/global-r-and-d-funding-forecast<\/a>. <a href=\"#return-footnote-97-1\" class=\"return-footnote\" aria-label=\"Return to footnote 1\">&crarr;<\/a><\/li><li id=\"footnote-97-2\">Art Kleiner, \u201cGetting China Right,\u201d <em class=\"im_emphasis\">Strategy and Business<\/em>, March 22, 2010, accessed January 23, 2011, <a class=\"im_link\" href=\"http:\/\/www.strategy-business.com\/article\/00026?pg=al\" target=\"_blank\">http:\/\/www.strategy-business.com\/article\/00026?pg=al<\/a>. <a href=\"#return-footnote-97-2\" class=\"return-footnote\" aria-label=\"Return to footnote 2\">&crarr;<\/a><\/li><li id=\"footnote-97-3\">Ajay Chamania, Heral Mehta, and Vikas Sehgal, \u201cFive Factors for Finding the Right Site,\u201d <em class=\"im_emphasis\">Strategy and Business<\/em>, November 23, 2010, accessed May 17, 2011, <a class=\"im_link\" href=\"http:\/\/www.strategy-business.com\/article\/10403?gko=e029a\" target=\"_blank\">http:\/\/www.strategy-business.com\/article\/10403?gko=e029a<\/a>. <a href=\"#return-footnote-97-3\" class=\"return-footnote\" aria-label=\"Return to footnote 3\">&crarr;<\/a><\/li><li id=\"footnote-97-4\">Navi Radjou, \u201cR&amp;D 2.0: Fewer Engineers, More Anthropologists,\u201d <em class=\"im_emphasis\">Harvard Business Review<\/em> (blog), June 10, 2009, accessed January 2, 2011, <a class=\"im_link\" href=\"http:\/\/blogs.hbr.org\/radjou\/2009\/06\/rd-20-fewer-engineers-more-ant.html\" target=\"_blank\">http:\/\/blogs.hbr.org\/radjou\/2009\/06\/rd-20-fewer-engineers-more-ant.html<\/a>. <a href=\"#return-footnote-97-4\" class=\"return-footnote\" aria-label=\"Return to footnote 4\">&crarr;<\/a><\/li><li id=\"footnote-97-5\">\u201cHow We Do It: Strategic Tests from Four Senior Executives,\u201d <em class=\"im_emphasis\">McKinsey Quarterly<\/em>, January 2011, accessed January 22, 2011, <a class=\"im_link\" href=\"https:\/\/www.mckinseyquarterly.com\/PDFDownload.aspx?ar=2712&amp;srid=27\" target=\"_blank\">https:\/\/www.mckinseyquarterly.com\/PDFDownload.aspx?ar=2712&amp;srid=27<\/a>. <a href=\"#return-footnote-97-5\" class=\"return-footnote\" aria-label=\"Return to footnote 5\">&crarr;<\/a><\/li><li id=\"footnote-97-6\">Carol Wingard, \u201cEnsuring Value Creation through International Expansion,\u201d <em class=\"im_emphasis\">L.E.K. Consulting Executive Insights<\/em> 5, no. 3, accessed January 15, 2011, <a class=\"im_link\" href=\"http:\/\/www.lek.com\/sites\/default\/files\/Volume_V_Issue_3.pdf\" target=\"_blank\">http:\/\/www.lek.com\/sites\/default\/files\/Volume_V_Issue_3.pdf<\/a>. <a href=\"#return-footnote-97-6\" class=\"return-footnote\" aria-label=\"Return to footnote 6\">&crarr;<\/a><\/li><li id=\"footnote-97-7\">Jeanne Meister and Karie Willyerd, <em class=\"im_emphasis\">The 2020 Workplace<\/em> (New York: HarperBusiness, 2010), 22, citing \u201cFT500 2009,\u201d <em class=\"im_emphasis\">Financial Times<\/em>, accessed November 27, 2009, <a class=\"im_link\" href=\"http:\/\/www.ft.com\/reports\/ft500-2009\" target=\"_blank\">http:\/\/www.ft.com\/reports\/ft500-2009<\/a>. <a href=\"#return-footnote-97-7\" class=\"return-footnote\" aria-label=\"Return to footnote 7\">&crarr;<\/a><\/li><li id=\"footnote-97-8\">\u201cPractical Advice for Companies Betting on a Strategy of Globalization,\u201d <em class=\"im_emphasis\">Knowledge@Wharton<\/em>, January 12, 2011, accessed February 5, 2011, <a class=\"im_link\" href=\"http:\/\/knowledge.wharton.upenn.edu\/article.cfm?articleid=2541\" target=\"_blank\">http:\/\/knowledge.wharton.upenn.edu\/article.cfm?articleid=2541<\/a>. <a href=\"#return-footnote-97-8\" class=\"return-footnote\" aria-label=\"Return to footnote 8\">&crarr;<\/a><\/li><li id=\"footnote-97-9\">\u201cPractical Advice for Companies Betting on a Strategy of Globalization,\u201d <em class=\"im_emphasis\">Knowledge@Wharton<\/em>, January 12, 2011, accessed February 5, 2011, <a class=\"im_link\" href=\"http:\/\/knowledge.wharton.upenn.edu\/article.cfm?articleid=2541\" target=\"_blank\">http:\/\/knowledge.wharton.upenn.edu\/article.cfm?articleid=2541<\/a>. <a href=\"#return-footnote-97-9\" class=\"return-footnote\" aria-label=\"Return to footnote 9\">&crarr;<\/a><\/li><li id=\"footnote-97-10\">Paul Redfern, \u201cAfrica: Trade between China and Continent at U.S.$115 Billion a Year,\u201d <em class=\"im_emphasis\">Daily Nation<\/em>, February 11, 2011, accessed February 14, 2011, <a class=\"im_link\" href=\"http:\/\/allafrica.com\/stories\/201102140779.html\" target=\"_blank\">http:\/\/allafrica.com\/stories\/201102140779.html<\/a>. <a href=\"#return-footnote-97-10\" class=\"return-footnote\" aria-label=\"Return to footnote 10\">&crarr;<\/a><\/li><li id=\"footnote-97-11\">Alex Perry, \u201cAfrica, Business Destination,\u201d <em class=\"im_emphasis\">Time<\/em>, March 12, 2009, accessed February 14, 2011, <a class=\"im_link\" href=\"http:\/\/www.time.com\/time\/specials\/packages\/article\/0,28804,1884779_1884782_1884769,00.html#ixzz1DwbdOXvs\" target=\"_blank\">http:\/\/www.time.com\/time\/specials\/packages\/article\/0,28804,1884779_1884782_1884769,00.html#ixzz1DwbdOXvs<\/a>. <a href=\"#return-footnote-97-11\" class=\"return-footnote\" aria-label=\"Return to footnote 11\">&crarr;<\/a><\/li><li id=\"footnote-97-12\">Steve Bloomfield, \u201cChina in Africa: Give and Take,\u201d <em class=\"im_emphasis\">Emerging Markets<\/em>, May 27, 2010, accessed February 14, 2011, <a class=\"im_link\" href=\"http:\/\/www.emergingmarkets.org\/Article\/2580082\/CHINA-IN-AFRICA-Give-and-take.html\" target=\"_blank\">http:\/\/www.emergingmarkets.org\/Article\/2580082\/CHINA-IN-AFRICA-Give-and-take.html<\/a>. <a href=\"#return-footnote-97-12\" class=\"return-footnote\" aria-label=\"Return to footnote 12\">&crarr;<\/a><\/li><li id=\"footnote-97-13\">\u201cThe Globalization of Chilean Retailing,\u201d <em class=\"im_emphasis\">Knowledge@Wharton<\/em>, December 12, 2007, accessed January 5, 2011, <a class=\"im_link\" href=\"http:\/\/www.wharton.universia.net\/index.cfm?fa=viewfeature&amp;id=1450&amp;language=english\" target=\"_blank\">http:\/\/www.wharton.universia.net\/index.cfm?fa=viewfeature&amp;id=1450&amp;language=english<\/a>. <a href=\"#return-footnote-97-13\" class=\"return-footnote\" aria-label=\"Return to footnote 13\">&crarr;<\/a><\/li><li id=\"footnote-97-14\">\u201cThe Globalization of Chilean Retailing,\u201d <em class=\"im_emphasis\">Knowledge@Wharton<\/em>, December 12, 2007, accessed January 5, 2011, <a class=\"im_link\" href=\"http:\/\/www.wharton.universia.net\/index.cfm?fa=viewfeature&amp;id=1450&amp;language=english\" target=\"_blank\">http:\/\/www.wharton.universia.net\/index.cfm?fa=viewfeature&amp;id=1450&amp;language=english<\/a>. <a href=\"#return-footnote-97-14\" class=\"return-footnote\" aria-label=\"Return to footnote 14\">&crarr;<\/a><\/li><li id=\"footnote-97-15\">(AACSB: Reflective Thinking, Analytical Skills) <a href=\"#return-footnote-97-15\" class=\"return-footnote\" aria-label=\"Return to footnote 15\">&crarr;<\/a><\/li><\/ol><\/div>","protected":false},"author":9,"menu_order":2,"template":"","meta":{"_candela_citation":"[]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-97","chapter","type-chapter","status-publish","hentry"],"part":93,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/wp-json\/pressbooks\/v2\/chapters\/97","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/wp-json\/wp\/v2\/users\/9"}],"version-history":[{"count":3,"href":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/wp-json\/pressbooks\/v2\/chapters\/97\/revisions"}],"predecessor-version":[{"id":514,"href":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/wp-json\/pressbooks\/v2\/chapters\/97\/revisions\/514"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/wp-json\/pressbooks\/v2\/parts\/93"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/wp-json\/pressbooks\/v2\/chapters\/97\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/wp-json\/wp\/v2\/media?parent=97"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/wp-json\/pressbooks\/v2\/chapter-type?post=97"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/wp-json\/wp\/v2\/contributor?post=97"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/wp-json\/wp\/v2\/license?post=97"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}