GROUP-1&2

What influences your companies global expansion?

CULTURAL DISTANCE

ADMINISTRATIVE & POLITICAL DISTANCE

GEOGRAPHIC DISTANCE

EXAMPLE
In 1991, Star TV wanted to enter Asian market The English was taken as the language of transmission GEOGRAPHIC DISTANCE was side stepped with the use of satellite

BUT STILL STAR TV FAILED, WHY?

Wrong tools used for analyzing the foreign markets.

Because they ignored the importance of cultural, administrative and political and economic dimensions

JUST HOW MUCH DIFFERENCE DOES DISTANCE MAKE?

The amount of trade that takes place between two countries that are placed 5,000 miles apart is only 20% of what could take place if they are 1,000 miles apart.

A common currency increase trade by 340%

Common membership in a regional trading bloc increases trade by 330%

CULTURAL DISTANCE
Difference in religious beliefs, race, social norms and languages Trade between countries with common language is estimated to be 3 time higher For eg: Chinese have high tolerance for copyright infringement

CULTURAL DISTANCE
Ignoring CULTURAL DISTANCE was one of STAR TVs biggest mistakes India and China require significant investment in localization Food Industry like Hindus do not eat beef

ADMINISTRATIVE or POLITICAL DISTANCE

Colony-colonizer links between countries boost trade by 900% Political union increase trade by more than 300% Policies of individual government poses the most common barrier to cross border competition

ADMINISTRATIVE or POLITICAL DISTANCE

Some of major affecting decision: It is a large employer It is seen as national champion It is vital to national security It produces staple It exploits natural resources

ADMINISTRATIVE or POLITICAL DISTANCE

Companies typically shy away from doing business in countries with corruption Likewise the STAR TV was to face a ban being a foreign satellite TV

Distance framework
Geographic distance Farther the distance of a country, harder to conduct the business It also includes: Within country distances to borders Access to waterways and the ocean Topography Countrys transportation & communications

Affects on various goods

Affects on various businesses Low value to weight or bulk ratio products Affected by costs increasing as transportation distance increases Intangible goods Affected by the telephone traffic and number of branches of multinational banks Eg: equity flows
Direct investment not feasible in target country as information and transportation will still be a problem

Distance framework
Economic distance Income of consumers is decision maker Rich countries trade more than their poor cousins Rich countries trade more with rich countries

Distance framework
Investment by companies should be, In similar countries if: Reliance is more on experience, scale and standardization Eg: Walmart In dissimilar countries if: Exploitation of cost and price difference has to be done Eg: Garment, footwear

Barriers to business
Disparities in supply chains and distribution channels Eg: Distribution within U.S. costs more than international transportation costs involved Cross country complexity and change make company less agile and responsive w.r.t. Local companies Eg: Maytag gives better ROI to its investors than Whirlpool and Electrolux

THANKYOU!!!