1. © Sanjyot Dunung 2011, published by Flat World Knowledge
International Business: Opportunities and Challenges in a Flattening World, 1e By Mason Carpenter and Sanjyot P. Dunung
© Sanjyot Dunung 2011, published by Flat World Knowledge

2. © Sanjyot Dunung 2011, published by Flat World Knowledge
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© Sanjyot Dunung 2011, published by Flat World Knowledge

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Chapter 8 International Expansion and Global Market Opportunity Assessment
© Sanjyot Dunung 2011, published by Flat World Knowledge

4. © Sanjyot Dunung 2011, published by Flat World Knowledge
Learning Objectives
Learn about the rationale and motivations for international expansion
Understand the importance of international due diligence
Recognize the role of regional differences, consumer preferences, and industry dynamics
Know the components of PESTEL analysis
Recognize how PESTEL is related to the dimensions of globalization
Understand why importing might be a stealth form of international entry
© Sanjyot Dunung 2011, published by Flat World Knowledge

5. © Sanjyot Dunung 2011, published by Flat World Knowledge
Learning Objectives
Describe the five common international-expansion entry modes
Know the advantages and disadvantages of each entry mode
Understand the dynamics among the choice of different entry modes
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7. Rationale for International Expansion
To improve the cost-effectiveness of their operations
To expand into new markets for new customers
To follow global customers
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8. Planning for International Expansion
It is important for firms to prioritize which countries to enter first and to evaluate each country’s relative merits because:
Many markets look appealing due to their market size or low-cost production
© Sanjyot Dunung 2011, published by Flat World Knowledge

9. International Market Due Diligence
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
Includes:
Regional differences
Understanding local consumers
How to learn the needs of a new foreign market
Differentiation and capability
Industry dynamics
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10. Know the Components of PESTEL Analysis
An important and widely used tool that helps present the big picture of a firm’s external environment in political, economic, sociocultural, technological, environmental, and legal contexts, particularly as related to foreign markets; analyzes for market growth or decline and the position, potential, and direction for a business
Three steps in the PESTEL analysis
Consider the relevance of each of the PESTEL factors to your context
Identify and categorize the information that applies to these factors
Analyze the data and draw conclusions
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11. Factors Favoring Industry Globalization
Markets
Homogeneous customer needs
Global customer needs
Global channels
Transferable marketing approaches
Costs
Large-scale and large-scope economies
Learning and experience
Sourcing efficiencies
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12. Factors Favoring Industry Globalization
Favorable logistics
Arbitrage opportunities
High research-and-development (R&D) costs
Governments
Favorable trade policies
Common technological standards
Common manufacturing and marketing regulations
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13. Factors Favoring Industry Globalization
Competition
Interdependent countries
Global competitors
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14. Importing as a Stealth Form of Internationalization
Importing: The sale of products or services in one country that are sourced in another country
Firms that engage in importing must learn about:
Customs requirements
Informed compliance with customs regulations
Entry of goods
Invoices
Classification and value
Determination and assessment of duty
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15. Importing as a Stealth Form of Internationalization
Special requirements
Fraud
Marketing
Trade finance and insurance
Foreign trade zones
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16. Importing as a Stealth Form of Internationalization
Outsourcing: Contracting with a third party to do some of a company’s work on its behalf
Offshoring: Taking some business function out of the company’s country of origin to be performed in another country, generally at a lower cost
International outsourcing: The term for both outsourcing and offshoring work, or outsourcing to a nondomestic third party
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17. Table 8.1 - International-Expansion Entry Modes
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18. Common International-Expansion Entry Modes
Strategic alliance: An international entry mode involving a contractual agreement between two or more enterprises stipulating that the involved parties will cooperate in a certain way for a certain time to achieve a common purpose
Greenfield venture: An international entry mode involving the establishment of a new, wholly owned subsidiary
© Sanjyot Dunung 2011, published by Flat World Knowledge

19. Common International-Expansion Entry Modes
Licensing: An international entry mode involving the granting of permission by the licenser to the licensee to use intellectual property rights, such as trademarks, patents, or technology, under defined conditions
Acquisition: An international entry mode in which a firm gains control of another firm by purchasing its stock, exchanging stock, or, in the case of a private firm, paying the owners a purchase price
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Cage Analysis
CAGE framework: The analytical framework used to understand country and regional differences along the distance dimensions of culture, administration, geography, and economics
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21. Table 8.2 - The CAGE Framework
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22. Table 8.2 - The CAGE Framework
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23. Table 8.2 - The CAGE Framework
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24. CAGE Analysis and Institutional Voids
Institutional voids: The absence of key specialized intermediaries found in the markets of finance, managerial talent, and products, which otherwise reduce transaction costs
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Table Specialized Intermediaries within a Country or Other Geographic Arena
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26. Strategies for Handling Institutional Voids
Adapt its business model
Change the institutional context
Stay away
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27. The History and Role of Scenario Planning and Analysis
SWOT (strengths, weaknesses, opportunities, threats): A strategic management tool that helps an organization take stock of its internal characteristics (strengths and weaknesses) to formulate an action plan that builds on what it does well while overcoming or working around weaknesses and assess external environmental conditions (opportunities and threats) that favor or threaten the organization’s strategy
© Sanjyot Dunung 2011, published by Flat World Knowledge

28. The History and Role of Scenario Planning and Analysis
Scenario planning: A process of analyzing possible future events by considering alternative possible outcomes (scenarios)
Steps:
Choose the target issue, scope and time frame that the scenario will explore
Brainstorm a set of key drivers and decision factors that influence the scenario
Define the two dimensions of greatest uncertainty
Detail the four quadrants of the scenarios with stories
Identify indicators that could signal which scenario is unfolding
Assess the strategic implications of each scenario
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29. Trends and Uncertainties
In the context of scenario planning, forces for change whose direction, and sometimes timing, can be predicted
Uncertainties
In the context of scenario planning, forces for change whose direction, and sometimes timing, can be predicted
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