Question

Choose two foreign countries and write a report that will help a U.S firm looking for countries to expand. The purpose of your report is to provide useful information that will help the CEO of company X make his/her expansion decision.

You will need to also consider what your company is good/weak at. Take the company's reason for going global into consideration in your discussion.

Answer 1

Let's say the countries are China and India, the most attractive markets for firms who wish to expand globally. The two countries have been selected based upon their attractiveness in terms of its population and growing per capita income. An assumption about the nature of business has to be made right now, let's say the company is a tech company serving its customers with electronic products.

In such a case, the CEO needs to take several factors under consideration which can be broadly divided into: social, economical, political and industrial.

In China, the company will find itself having a hard time due to availability of several other competitors in the market serving same genre of products at a much cheaper rate that can almost acta as a perfect substitute. However, if the company gets successful in establishing brand image, it can tap into the higher income group of the country. Another problem that the company would he suffering from is the volatile nature of the economic relations between US and China which would indeed impose high risk on the company's business. The political environment of the country is a direct factor affecting the economic and political relations between the country and an indirect factor in increasing or decreasing the business of the company. The existence of competitors would definitely drive down the profits making it disadvantageous for the company however, price wars if played properly would help in capturing larger market thereby offsetting the effect of driven down prices.

The primary reason of going global was increasing revenue by capturing larger markets and expanding business to create dominance in the coming years.

In India, the company will find itself at ease, if the company serves the faction of higher income, it may find India not as attractive as China, however, the country has a growing per capita income and a younger generation as compared to China. The price wars would exist in India as well but the country is more open to choices especially ones which can reflect brand values and consider it for acceptance. The company may find it hard to comply with the rules and regulations of the country to setup its business as the protocols are complex as well as discouraging for capitalist organisation. However, it wouldn't have to consider the risk relating to economic and political relations thereby reducing the exposure. The cost of doing business would be more expensive than China as the quality and experience of labour in the industry is not as much as that of Chinese. The company might also have to make a choice of setting up manufacturing units in India or in China. Setting one in India might be costly but would be beneficial in the long run due to regulations encouraging companies providing employment opportunities.