PART F – RISKS OF EXPANDING GLOBALLY AS (3.3) Apply business knowledge to address a complex problem in a given global business context

Any company that expands internationally is bound to face certain risks in dealing with the local culture, language, business practices and government regulations. Before expanding, the business should first consider and study all of these factors to determine if the decision to trade abroad is the right one.

Cultural & Language Barriers Business transactions are not conducted in an identify way worldwide. These cultural differences may interfere with the manner in which business associates work and communicate with each other.

For example, in India a potential associate may be nodding his head from side to side, which to New Zealanders may appear to be a negative gesture. In India, however, it is a gesture of understanding. Meetings with business associates in China are run differently than they would in New Zealand. In China hosts arrive later than guests, and Chinese associates may talk among themselves during presentations, both practices we would consider rude in New Zealand.

These conflicts are most noticeable among cultures that are unable to understand each other and have completely different traditions and thought processes. As long as staff members who will be visiting overseas trading partners are trained to be aware of these differences, business relationships can be successful.

An important element in making global expansion successful is finding creative solutions to cultural differences by respecting both cultural perspectives.

Language is another barrier that causes conflicts to businesses wanting to expand internationally. When a New Zealand company is trading in a country where English is not widely used, it will probably be necessary to use trained translators to bridge the communication gap.

Marketing Campaigns When launching a marketing campaign or advertising to members of a different culture, a firm must always research the target market prior to beginning the campaign. Levels of conservatism, gender views and ideologies can vary greatly between cultures. Presenting a campaign that is not in line with specific cultural norms can insult the target audience and greatly harm the campaign.

Being aware of cultural norms can also help a company narrow down the target audience. For instance, in Japan men are usually in control of decision- making, whereas women make the majority of purchasing decisions in Sweden.

Trading Environment A company wishing to enter a foreign market must do thorough research beforehand to ensure the unique risks and issues presented by the country are known. It is important to assess political risks, the legal environment and the business and competitive environment. Strategies can be developed to minimise or avoid risks.

The business should study the histories of local and international companies in the country and the industry to gain deeper insight into what their own experience may be like. Exchange rates, current and historical, should be carefully examined. Consulting firms specialising in international investment will have good knowledge of the challenges and opportunities presented to international businesses in the foreign country.

Uncertainty Business does not like uncertainty. It affects future planning and investment.

The business should consider partnering with organisations in the foreign country. Some of the uncertainties can be avoided by co-operating with organisations to take advantage of their market-specific expertise and local reputation.

Fluctuations in Exchange Rates

Trade Agreements Trade agreements have become an important part of New Zealand’s international trade policy. Trade agreements, also known as ‘closer economic partnerships’ make trading between New Zealand and the trading partner easier.

Some of New Zealand’s trade agreements include: O Closer Economic Relations (CER), with Australia, came into force on 1 January 1983 O China : New Zealand Free Trade Agreement, 2008 O New Zealand and Singapore Closer Economic Partnership, 2001

Economic free- market reforms of the last decades have removed many barriers to foreign investment, and the World Bank has praised New Zealand as being the most business-friendly country in the world.