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Limitations of being international

Location and the impact of globalization - the internet has made location a completely different thing with online shopping and teleworking becoming more and more popular. Things to consider when deciding on which country to do business in

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Limitations of being international

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  1. Location and the impact of globalization - the internet has made location a completely different thing with online shopping and teleworking becoming more and more popular. Things to consider when deciding on which country to do business in • Production costs – labor and material costs are cheaper in some countries but distribution costs are a worry • Government rules and regulation – sometimes to get around government trade rules (import restriction (taxes, duties) a business will do direct investment in the country they wish to sell in. This has it’s relocation costs as well. • If a business becomes multinational then they can usually take advantage of huge economies of scale.

  2. Limitations of being international • Language – if translators are needed that can really drive up costs • Culture – not understanding the views of the local culture can be very costly • Regulations and legalities – employee rights laws, consumer protection, environmental laws are different in different countries. • Communication – longer chains of command and time zone differences can cause problems • Political stability – corrupt governments can hold back a business while tax incentives can help some businesses. • Economic investment – unemployment, interest rates, inflation as well as overall economic cycle will affect a business.

  3. Location and business activity • These questions a business will ask themselves about a location Personnel • Are there sufficient/suitable/skilled workers? • What skills and training might they need • Cost of labor • What are other firms offering? If relocation is the issue business must also thing of: • How many managers and employees will be relocated? • Will replacement labor be available? • How many redundancies will there be and what is the cost? • Will there be trade union opposition?

  4. Marketing • Will the business be able to identify and exploit opportunities in this area? • What is the customer profile(demographics) of the area? Is it suitable for our company? • Is the product already available or is there a niche opportunity? • How will the location affect the cost of production? • How will the local exchange rate affect our business? • What promotional strategies work in the area? • What Ethical issues does the business need to worry about in terms of marketing? • Are distribution networks in place?

  5. Production • Will the resources we need be available? • Are suppliers easy to deal with? • How many and how strong is competition? • How might quality be affected? • What complementary services are available?(if we need a port is in close, if we need large amounts of electricity is it available?) Finance • What is the cost of land or office space? • What are our available sources of finance? • What is the cost of a license/registration? • What is the tax rate in the local area? • When is the firm expected to break even/payback period? • What is the cost of equipment, machines, vehicles… in the area?

  6. For homework take the first business idea you had and ask these questions about the location of your business. • IT IS PERFECTLY OK TO HAVE A FEW NO’S OR ALL NO’S WITH YOUR CHOSEN LOCATION! YOU DID NOT KNOW THESE THINGS WHEN YOU FIRST DID THE ASSIGNMENT! • Answer in a full sentences and explain why you said yes or no. • If you do not know about your location then look it up! • Due 3 Weeks from today

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