Their initially low salary scale, unlimited labor force, and few manufacturing restrictions have made China a major manufacturing and trade nation. Cultural risk refers to the potential for a company’s operations in a country to struggle due to differences in language, customs, norms, and customer preferences. The phrase “When in Rome, do as the Romans do” is used to encourage travelers to embrace local customs. Over time, a government could become increasingly hostile to foreign businesses by imposing new taxes and new regulations. Join the World Economic Forum's Fourth Industrial Revolution community. Consider, for example, natural disasters such as the earthquakes and tsunami that hit Japan in 2011. Earlier this year, research company Alix Partners released a report that showed the United States had reached cost parity with Mexico as a preferred “nearshoring” location, and that it would reach similar parity with China by 2015. Cultural risk refers to the potential for a company’s operations in a country to struggle because of differences in language, customs, norms, and customer preferences (Figure 7.11 “Cultural Risk: When in Rome”). Executives believed that their product was being skillfully promoted using print advertisements that showed dirty clothing on the left, a box of detergent in the middle, and clean clothing on the right. The Art of Public Speaking 12th Edition. Mastering Strategic Management - 1st Canadian Edition by Janice Edwards is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted. They have also introduced e-cigerettes as a separate business line to retain customers and profits. Given our immense shared border with the United States, it is not surprising that Canada and the U.S. are each others’ largest trading partner, and the world’s largest trading partnership. This wave of reshoring has yet to touch Canada’s shores, reflecting the country’s status as a relatively expensive place to assemble gadgets, parts, and machinery. After spending a couple of decades advising Western clients on how to “offshore” their production facilities to low-cost jurisdictions in Asia, business consultancies say it might be time to bring some of that work home. The two most populous nations in the world, both have growing middle classes, defined loosely as people financially able to purchase goods and services that are not merely necessities of life. Most IT work is still performed in Canada, IDC says, but a growing share of the market is going to companies outside the country. These machines can weigh more than a ton, and NCR found that shipping them from overseas plants back to the United States was extremely expensive. Who doesn’t want a bag that says “Roots” on it? For example, British author J. K. Rowling’s Harry Potter and the Philosopher’s Stone was changed to Harry Potter and the Sorcerer’s Stone in the United States because of the belief that American children would find a philosopher to be boring. this is what my fridge looks like right now. The combination of rising wages in China, elevated shipping costs, and a rethinking of supply chains is making North America the hot “new” global manufacturing hub. Dangerously in Love is the debut solo studio album by American singer Beyoncé.It was released on June 17, 2003, through Columbia Records and Music World Entertainment. S.C. & D.H. (2014, May 2). Chinese and American GDP Forecasts, Catching the Eagle.  Retrieved from http://www.economist.com/blogs/graphicdetail/2014/05/chinese-and-american-gdp-forecasts, Szczesny, J.  (2014).  GM sells more cars in China than US again.  MSN Autos.  Retrieved from http://editorial.autos.msn.com/gm-sells-more-cars-in-china-than-us-again, T2M. Chapter 1: Mastering Strategy: Art and Science, Defining Strategic Management and Strategy, Intended, Emergent, and Realized Strategies, Understanding the Strategic Management Process, Chapter 3: Evaluating the External Environment, The Relationship between an Organization and Its Environment, Beyond Resource-Based Theory: Other Views on Firm Performance, Chapter 5: Selecting Business-Level Strategy, Understanding Business-Level Strategy through “Generic Strategies”, Focused Cost Leadership and Focused Differentiation, Chapter 6: Supporting the Business-Level Strategy: Competitive and Cooperative Moves, Chapter 7: Competing in International Markets, Advantages and Disadvantages of Competing in International Markets, Drivers of Success and Failure When Competing in International Markets, Options for Competing in International Markets, Chapter 8: Selecting Corporate-Level Strategies, Portfolio Planning and Corporate-Level Strategy, Chapter 9: Executing Strategy through Organizational Design, The Basic Building Blocks of Organizational Structure, Chapter 10: Leading an Ethical Organization: Corporate Governance, Corporate Ethics, and Social Responsibility, Corporate Ethics and Social Responsibility. Canada ranks at 0.5 percent of the world’s population. Do not clean you plate in China. Few companies have a stronger “American” identity than McDonald’s. Selling goods and services to the other 95 percent of people on the planet can be very appealing, especially for companies whose home market is saturated (Figure 7.3 “Why Compete in New Markets?”). Tobacco use in these areas is declining as laws are passed restricting smoking in public areas and restaurants, high taxation on smoking continues, and society’s views of smoking change. Firms venturing into new markets must be willing to face the three risks on the global battlefield that we outline below. Figure 7.13 image description: Watch Your Language. Wondering what it means when a British friend asks, “What’s under your bonnet?” Open the hood of your car to Offer an answer. As primarily a trading nation, Canada has also benefited from the rapid growth in international trade and globalization. Do you expect reshoring to become more popular in the years ahead? The fact that “root” is an Aussie slang for “sexual intercourse” and often replaces the F-bomb in sentences may have somewhat helped its popularity Down Under. In fact, it is fair to say that every Canadian business is affected by international markets to some degree, although services are typically affected to a lesser extent. Figure 7.4: Levi’s jeans are appreciated by customers worldwide, as shown by this balloon featured at the Putrajaya International Hot Air Balloon Fiesta. How U.S. Reshoring Will Force Canadian Manufacturers to Innovate – And Change the Very Nature of the Sector. It’s the equivalent to giving someone the middle finger. Coca-Cola is active in dozens of countries, forcing Coca-Cola executives to carefully monitor economic trends and events in each. Ford Motor Company sold a total of 935,813 vehicles in China in 2013, setting another annual record. Retrieved from http://www.kia-press.com/press/corporate/20090605-kia%20sales%20 climb%20strongly%20in%2010%20countries.aspx, Kostigen, T. (2011, February 25). Figure 7.11: Attribution information for all included images is in the chapter conclusion. China and India are increasingly attractive markets to U.S. firms. Genetic editing. Many firms that compete in international markets hope to gain cost advantages. Boston company gives up on offshoring call centre jobs to India, moves them to Maine instead. Understand the risks faced when competing in international markets. In other cases, the expected cost savings of offshore production have not materialized. For example, a laundry detergent company was surprised by its poor sales in the Middle East. Ubiquitous, mobile supercomputing. In India, you are more likely to hear “no problem” than Ono” as Indian nationals avoid the disappointment associated with using the word no. While political, cultural, and economic differences add danger to trade with China, the immense size of the Chinese market appeals to American firms. Similarly, in 2013 and 2014, military conflict between Russia and Ukraine sent international oil prices upward on fears of further instability in oil-rich countries. Unstable governments associated with such demonstrations and uprisings make it difficult for firms to plan for the future. Offshoring involves relocating a business activity to another country. The full book is available in English on Amazon in Kindle and print-on-demand. http://blogs.wickedlocal.com/massmarkets/2011/05/24/boston-company-gives-up-on-offshoring-call-center-jobs-to-india-moves-them-to-maine-instead/#ixzz3BnH3owUl, Flavelle, D.  (2013, February 4). Hyundai’s European sales dip, Kia market share edges up in 2013. The relative stability of Canadian, U.S., and European governments leaves citizens unfamiliar with the significant political disruption that can occur with a military takeover (Thailand), military or terrorist insurrection (Egypt), or outright war (Iraq). Made in USA: Overseas jobs come home. GM’s Chinese sales top US. Figure 7.13: Attribution information for all included images is in the chapter conclusion. Competitive advantage and access to specialized skills also ranked high on the list of benefits, the survey found. Avoid cultural gaffes. Wall Street Journal. (Carmichael, 2012; Ovsey, 2013). The relocation of a business activity to another country. Although competing in international markets offers important potential benefits, such as access to new customers, the opportunity to lower costs, and the diversification of business risk, going overseas also poses daunting challenges. NCR hired 500 workers to start making the ATMs and checkout systems at a plant in Columbus, Georgia. If inflation and interest rates were to increase in a particular country, this would make it more difficult for consumers to purchase new Kias. Competing in international markets involves important opportunities and daunting threats. One example of larger political change is the “Arab Spring,” a term used to refer to a series of uprisings in 2011 in countries such as Tunisia, Egypt, Libya, Bahrain, Syria, and Yemen, as their populations sought to overthrow corrupt governments. The area of a car called as trunk in America is known as boot in England. And their share is rising 20 percent a year. Intelligent robots. For example, major companies continue to outsource much of their IT work to specialists, a move that in many cases makes good business sense. Quantity Limited! Call centers in India have become so sophisticated that many Indian customer service representatives take extensive language training to learn regional U.S. dialects. Provocative dress is embraced by many Americans, but many people in Muslim countries consider a woman’s clothing to be inappropriate if it reveals anything besides the face and hands. It also has the potential to diversify risks. Figure 7.11 image description: Cultural Risk: When in Rome. Economic risk  refers to the potential for a country’s economic conditions and policies, property rights protections, and currency exchange rates to adversely affect a firm’s operations within a country. Competing in multiple markets allows this risk to be spread out among many economies and customers. By using our website you consent to all cookies in accordance with our updated Cookie Notice. In 2006, the United States accounted for 34 percent of McDonald’s revenue, while Europe accounted for 32 percent, and Asia, the Middle East, and Africa accounted for 14 percent. If everything is OK when your are in Brazil, avoid using the OK hand signal. This Fourth Industrial Revolution is, however, fundamentally different. Avoid cultural gaffes.Â. Have you ever seen an advertisement that was culturally offensive? (1993). Blunders in international business. In some cases, the quality provided by workers overseas is not good enough. In Japan, direct eye contact is viewed as impolite. A simple and effective message, right? This trend has created tremendous opportunities for some firms. Although the United States currently has the largest economy in the world, it accounts for less than 5 percent of the world’s population. Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, has been at the centre of global affairs for over four decades. This can provide a firm with stronger leverage when negotiating prices with its existing suppliers. Includes huge number of $10 Coupons, 97% off Coupons. Do not eat with your left hand in India or Malaysia. While offshoring can reduce a firm’s costs of doing business, the job losses in the firm’s home country can devastate local communities, leading to negative publicity. With less than one-third of its sales being generated in its home country, McDonald’s is truly a global powerhouse (University of Oregon Investment Group, 2013). In this new version of the introduction to Arabic letters and sounds, English-speaking students will find an innovative integration of colloquial and formal (spoken and written) Arabic. Access to new customers — China’s population is roughly four times as large as that of the United States. They’re handling everything from check processing to large databases, IDC says. While Americans look for a flashlight when power goes out, a torch is the preferred term for those outside of North America. Appendix 1: Mastering Strategic Management Powerpoints. Market Watch, Expanding abroad? Retrieved from http://www.marketwatch.com/story/beware-the -worlds-riskiest-countries-2011-02-25, Maltby, E. (2010, January 19). To appeal to local preferences for cigarettes flavored with cloves, Philip Morris introduced a variety of its signature Marlboro brand called Marlboro Mix 9 that includes cloves in its formulation (T2M, 2007). Recording sessions for the album took place from … Learn everything an expat should know about managing finances in Germany, including bank accounts, paying taxes, getting insurance and investing. During the 2000 Summer Olympics held in Sydney, Australia, clothing manufacturer Roots was the official outfitter for members of the Canadian Olympic and Paralympic teams. Most executives are understandably wary of making investments in unstable countries such as Afghanistan and Somalia. Not surprisingly, few boxes of the detergent were sold before this cultural blunder was discovered. Just like spreading one’s eggs into multiple baskets reduces the chances that all eggs will be broken, business risk is reduced when a firm diversifies across multiple countries. However, a growing number of U.S. companies are finding that offshoring is not providing the benefits they had expected. Today, camels have been replaced by airplanes, trains, and ships, and international trade is more alluring than ever. Hyundai and Kia are flagship companies of Hyundai Motor Group, the world’s fifth-largest automotive conglomerate. More recently an emerging middle class has begun to fuel national consumption, further increasing the economic wealth of the nation (Wikipedia, 2014). (2009, June 5). Kia sales climb strongly in 10 countries in May. Currently produced by Hasbro, the board game now simply called “Risk” continues to entice players with the allure of world domination. Dear Twitpic Community - thank you for all the wonderful photos you have taken over the years. Firms can choose to concentrate their efforts in countries such as Canada, Australia, South Korea, and Japan that have very low levels of political risk, but opportunities in such settings are often more modest (Kostigen, 2011). Executives at RecycleBank became offended when the British press referred to RecycleBank’s rewards program as a “scheme.” Their concern was unwarranted, however. You would likely be disgusted. Toyota and its two joint-venture partners recorded sales of 917,500 units, a 9.2 percent increase, while Honda’s China volume jumped 26 percent to 756,882. Economics of scale may be linked to greater production from existing facilities (sharing fixed costs across larger sales) and other shared costs such as research and development (R&D) and marketing. Many Canadian manufacturing firms would be hard pressed to produce for only the Canadian market, as the volumes of potential sales would not allow them to achieve economies of scale. The United States, as a single country, has the world’s largest economy. Incorporated as a not-for-profit foundation in 1971, and headquartered in Geneva, Switzerland, the Forum is tied to no political, partisan or … CNNMoney. In 2013, for example, GM sold more vehicles in China than it sold in the United States (3.2 million vs. 2.8 million) (Szczesny, 2014). Business risk refers to the potential that an operation might fail. Offshore firms account for $3 billion of the Canadian outsourced IT market. When a firm increases sales volume by entering a new country, for example, it may generate economies of scale that lower its overall and average production costs. An important part of fitting in is avoiding behaviour that locals consider offensive. The evidence of dramatic change is all around us and it’s happening at exponential speed. To consumers, the implication of the detergent ads was that the product could be used to take clean clothes and make them dirty. Because economies are unpredictable, economic risk presents executives with tremendous challenges. This has led to a new phenomenon known as reshoring, whereby jobs that had been sent overseas are returning home. Local or International? Tunisian people, or Tunisians (Arabic: تونسيون ‎ Tūnisiyyūn, Tunisian Arabic: توانسة ‎ Twensa), are a Maghrebi ethnic group and nation native to Northern Africa, who speak Tunisian (Derja) and share a common Tunisian culture and identity.In addition, a Tunisian diaspora has been established with modern migration, particularly in Western Europe, namely France, Italy and Germany. Leaving food on the plate indicates the host was so generous that the meal could not be finished. Download Full PDF Package. Urban legend says the Chevrolet Nova did not do well in Spanish speaking countries because the name translates as “no go.” The truth is that the car sold well in both Mexico and Venezuela. This process is called nationalization. In recent years, for example, Venezuela has nationalized foreign-controlled operations in the oil, cement, steel, and glass industries. Join the community below, and "like" the 4IR Facebook page. Below we provide a few examples. Countries with the highest levels of political risk tend to be those such as Somalia, Sudan, and Afghanistan whose governments are so unstable that few foreign companies are willing to go there. If currency exchange rates were to change such that the euro became weaker relative to the South Korean won, this would make a Kia more expensive for European buyers (Kia.com, 2014). Carmichael, K.  (2012, June 20).  Canada’s ‘Reshoring’ Opportunity.  The Globe and Mail.  Retrieved from http://www.theglobeandmail.com/report-on-business/economy/canada-competes/canadas-reshoring-opportunity/article4230748/, Chesto, J.  (2011, May 24).  Boston company gives up on offshoring call centre jobs to India, moves them to Maine instead.  Mass.Market.  Retrieved from

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